Yesterday the Treasury released guidance in regard to the Paycheck Protection Program; this interim final rule supplements the First PPP Interim Final Rule with guidance for individuals with self-employment income who file a Form 1040, Schedule C and those who are partners in partnerships.
Below are some highlights that came from the Additional Eligibility Criteria and Requirements for self-employed individuals:
- If you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.
- The Interim final guidance addresses what amounts shall be eligible for forgiveness, including:
- payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee (for eight weeks, a maximum of $15,385 per individual), as well as covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums);
- owner compensation replacement, calculated based on 2019 net profit, with forgiveness of such amounts limited to eight weeks’ worth (8/52) of 2019 net profit, but excluding any qualified sick leave equivalent for which a credit is claimed under the Families First Coronavirus Response Act.
- payments of interest on mortgage obligations on business use real or personal property entered into incurred before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C;
- rent payments on lease agreements for business use property in force before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C; and
- business utility payments under service agreements dated before February 15, 2020 to the extent they are deductible on Form 1040 Schedule C
3. SBA will issue additional guidance for those individuals with self-employment income who:
a. were not in operation in 2019 but who were in operation on February 15, 2020, and
b. will file a Form 1040 Schedule C for 2020.
Other items addressed in the guidance are eligible businesses clarification, documentation required to be submitted to the lender when requesting loan forgiveness, and restrictions on PPP loan proceeds. Please read the full guidance here for more details.
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